Bargaining Power

I posted this over at The Sports Economist, but all y'all might find it interesting too.

Relative bargaining power is a negotiator's willingness and ability to accept a dispute. In actual negotiations, one negotiator never knows how much bargaining power his opponent has, but the opponent's actions may reveal some information about how much relative power he thinks he has.

Turn to the NHL. Strikes are weapons used by unions to impose costs on their employers. The strikes impose costs on the workers too, but if the strike causes the employer to at least partially give ground while the union holds firm, the strike reveals some of the relative bargaining power of the employer. Lockouts are weapons used by employers to impose costs on their union workers (and on the employers as well). Like strikes, lockouts can cause the unions to reveal its relative bargaining power.

The NHL lockout has, at least in terms of the revelation of union relative bargaining power, been very successful so far. The union caved in, agreeing to a salary cap that its leaders said they would never accept. This tells us a lot of the relative willingness of the union to fight. Nicholas Costonika of the Detroit Free Press has this to say:

In canceling the season, the owners have shown that, at the end of the day, like it or not, this is their league. They can burn it down to build it back up again if they want -- and they're willing.

Hockey is the players' livelihood. Hockey used to be the owners' livelihood, when it was a family business, but it's a hobby for businessmen these days.

Look at the Detroit area's three NHL owners: Tampa Bay's Bill Davidson made his fortune in glass, the Red Wings' Mike Ilitch made his in pizza, Carolina's Peter Karmanos made his in computers. They can live without the game.

One of the determinants of relative bargaining power is the overall business climate. Over the past couple of years, the overall business climate for the teams, especially the "small market" teams, has been poor - my co-blogger, John Palmer, posts here that it is of the teams' own doing. Brian Goff notes here that some owners aren't happy with the cancelling of the season either. But, the teams have held firm so far and the union has caved - the teams have been more willing and able to accept the costs imposed by the lockout than the players have. Any final agreement is going to be tilted more towards what the teams' currently want - maybe much, much more.